Ranbaxy Laboratories (Ranbaxy) reported an impressive 167% growth in its net profit to Rs183.3 crore in Q4CY2006, which is higher than our expectation of Rs174.1 crore. The improvement in the profitability was triggered by a forex gain of $8 million. The focused cost-control efforts and rationalisation of research and development (R&D) spending also contributed to the profit growth.

The net sales were higher by 22% to Rs1,697.50 crore in Q4CY2006 which was 4% above our expectation. The revenue growth was supported by a stronger revenue inflow from the Simvastatin-80mg tablet (which was under exclusivity in the USA), integration of Terapia SA (which reported over 50% growth) and the jump of 45% in the business from Brazil, Russia, India, China and South Africa (BRICS) during the quarter.

However, the revenue growth was moderated by the pricing concerns in Europe, particularly the UK, Germany and France, leading to a 6% fall in the sales to $52 million and a 16% sequential decline in the domestic revenues to $66 million.

With the higher realisation from the products under exclusivity and cost-cutting efforts, the operating profit margin (OPM) expanded by 920 basis points to 15%; but the expansion was 240 basis points less than our expectation. Again the margins were inflated by a foreign exchange (forex) gain of $8 million (against a $2 million forex gain in Q4CY2005). So if we discount the impact of the forex gain and the other operating income, the OPM appears 620 basis points less than our expectation. There is another cause for concern as well: The OPM has declined by 180 basis points sequentially. The decline was caused partly by the tapering of the realisation from Simvastatin after the expiration of exclusivity in the fag end of Q4CY2006.

For CY2006, the company reported an 18% growth in the top line to Rs6,021.6 crore and an 890-basis-point expansion in the OPM to 15.4%. This caused the net profit to double (ie a 97% rise) to Rs515.1 crore.

The company has guided for a 15% top line growth (which is in line with our estimations) with an earnings before interest, tax, depreciation and amortisation (EBITDA) margin of 16% for CY2007. At the current market price, the stock trades at 19.9x CY2007E earnings of Rs20.8 per share. We maintain our Buy recommendation with a longer-term price target of Rs558.

The company achieved a net profit of Rs104 crore for Q3FY2007, in line with our expectations, translating into a year-on-year (y-o-y) growth of 165%.

The net sales increased by 153% year on year (yoy) to Rs364.5 crore driven by a huge 80% jump in the volumes and a robust 40% y-o-y rise in the realisations; however, the sales were down sequetially by 2%.

The operating expenditure increased by 128% yoy to Rs204.4 crore. The rise in the expenditure was in line with our expectations except for the freight cost, which was slightly more than expectations at Rs390 per tonne.

The sequential dip in the realisations as well as the rise in the freight costs can be attributed to the exercise undertaken by the company to test new markets like Uttar Pradesh. This exercise was undertaken as the company will be commissioning a plant of 1.5 million metric tonne (MMT) capacity in March 2007.

The operating profit rose by a whopping 194% yoy to Rs160 crore whereas the operating margins expanded by 620 basis points to 43.9%. The earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne rose 1.5x yoy to stand at Rs1,222 per tonne, whereas the EBITDA witnessed a marginal dip of 4% sequentially.

The interest cost stood much lower at Rs0.65 crore whereas the depreciation provision was also lower at Rs26 crore. Consequently, the net profit grew by 165.5 % yoy to Rs104 crore in line with our expectations.

Looking at the stupendous performance by the company in the first nine months of the current fiscal year, we are upgrading our FY2007 estimates by 20% to Rs400 crore as against Rs332 crore as per current estimates.

At the current market price of Rs1,500, the stock is trading at 13.1x its FY2007 earnings and 11.7x its FY2008 earnings. We maintain our Buy recommendation on the stock with a price target of Rs1,700.

Canara Bank's net profit grew by only 1.9% to Rs363 crore, below our expectations of Rs394.7 crore. The operating performance was better than our expectations mainly due to the controlled expenses rather than the growth in the income, but higher provisions have been a surprise, which resulted in the reported profit after tax (PAT) being 8% lower than our estimates.

During the quarter the bank's net interest income (NII) grew by 8.4% year on year (yoy) to Rs1,038.6 crore compared to our expectations of a 5.6% year-on-year (y-o-y) growth to Rs1,012.3 crore. The increase is primarily due to a sharp rise in the inteest on the RBI balances and the other interest component.

The other income declined by 3.8% yoy due to a 1.4% decline in the fee and other income and a 20% decline in the trading income.

The reported net interest margin (NIM) has declined by 16 basis points to 3.14% on a y-o-y basis but remained stable on a sequential basis. The NIM has been under pressure on a y-o-y basis because of a steep jump in the interest expended component, which has increased by 50% yoy mainly due to a 29% growth in the deposits and a 58-basis-point y-o-y increase in the cost of funds to 4.86%.

The operating profit was better than our estimates of Rs648.7 crore and touched Rs701 crore, which remained stable on a y-o-y basis but improved by 13.9% on a sequential basis mainly due to a 6.2% quarter-on-quarter (q-o-q) decline in the operating expenses brought about by the lower staff expenses.

The provisions at Rs263 crore were up 7.4% yoy. However we expected the provisions to be lower on account of the lower marked-to-market provisions. Hence, despite the operating profits being higher than our expectations the PAT at Rs363 crore was below our expectations of Rs394.7 crore.

The non-performing asset (NPA) provisions have been lower although the absolute NPA numbers are on the rise on a sequential basis. Hence we feel that going forward higher NPA provisions slightly above the regulatory requirement would be prudent.

Satyam Computer Services (Satyam) reported a revenue growth of 3.7% quarter on quarter (qoq) and of 31.3% year on year (yoy) to Rs1,661 crore during the third quarter. The revenue growth was not only below market expectations but also a tad below the company's guidance. The consolidated volume growth was decent at 8.2% qoq but the same was not reflected in the revenue growth due to the appreciation in the rupee and the shift in the revenue mix towards the offshore business.

The operating profit margin (OPM) improved by 205 basis points to 24.7% on a sequential basis, in spite of the adverse impact of the rupee appreciation, an increase in the selling, general and administrative (SG&A) expenses as a percentage of sales and a decline in the profitability of its subsidiaries. On the ther hand, the shift towards high-margin offshore business, decline in provisions (related to leave encashment and gratuity) and other cost efficiencies (including pricing and productivity gains in foxed priced projects) had a positive impact (of over 400 basis points) on the margins. Consequently, the operating profit grew at a healthy rate of 13.1% sequentially to Rs410 crore.

However, the earnings growth was limited by the steep decline of 64.2% in the other income component to Rs10.1 crore (due to the foreign exchange fluctuation loss of Rs35.5 crore) and the increase in the effective tax rate to 10.7% (up from 8.8% in the previous quarter). Consequently, the consolidated earnings grew by 5.4% qoq and 25% yoy to Rs337.2 crore, which is below the consensus estimate of around Rs340 crore.

For Q4, the consolidated revenues and earnings are guided to grow by 4-4.5% and 5.4% respectively on a sequential basis. This implies a 0.3-0.5% downgrade in the annual revenue guidance to Rs6,434-6,442 crore (down from Rs6,452-6,476 crore guided earlier). But the annual guidance for the earnings including the stock compensation charges has increased marginally to Rs20.9 per share (up from Rs20.73-20.81 per share guided earlier). Moreover, the marginal upgrade in the revenue guidance in dollar terms to $1,443-1,445 million (up from $1,434-1,440 million guided earlier) suggests that the downgrade in the revenue guidance in rupee terms is largely due to the steep appreciation in the rupee.

At the current price the stock trades at 23.3x FY2007 and 19.4x FY2008 estimated earnings (including the non-cash charges for the stock options). We maintain our Buy call on the stock with a revised price target of Rs550 (18x rolling four quarters one-year forward earnings).

Nicholas Piramal (Nicholas) reported a 61.3% year-on-year (y-o-y) increase in its net sales to Rs649.5 crore in Q3FY2007. The growth was achieved on the back of a 13% increase in the domestic sales and a whopping 208.9% surge in the global revenues. The sales growth was ahead of expectations.

The 13% rise in the domestic sales was driven mainly by a 12.6% growth in the branded formulation business and a staggering 53.1% rise in the pathology laboratory (pathlabs) business.

The international sales benefitted largely from the incremental revenues flowing in from Pfizer's Morpeth facility in the UK and Avecia (now NPIL UK). Morpeth and NPIL UK together contributed Rs216 crore of revenues during the quarter, up 17% on a sequential basis.

Nicholas' operating profit margin (OPM) expanded by 650 basis points to 14.9% in the quarter, driven by a sharp 970-basis-point reduction in the raw material cost and a 360-basis-point drop in the other expenses. The material cost improved because the company derived a higher amount of the high-margin CRAMS revenues during the quarter. Further, the enhanced capacity utilisation of the Morpeth facility also increased the operating leverage.

Consequently, the company's operating profit rose by 185.3% to Rs97 crore during the quarter.

Even though the acquisitions led to a substantial increase in the interest and depreciation expenses during the quarter, the growth in the net profit was impressive at 400% to Rs48.4 crore. Adjusting for the income for the prior-period adjustments, the adjusted net profit stood at Rs55.6 crore, up 474% year on year (yoy). The net profit growth was aided by a relatively lower tax incidence during the quarter. The tax outgo was lower on account of the progressive shift of the manufacturing activities to the tax-exempt Baddi facility. The net profit was in line with our estimates.

At the current market price of Rs266, the stock is quoting at 15.9x its estimated FY2008 earnings. In view of the strong revenue flows and the enhanced profitability picture for the coming years, we maintain our Buy recommendation on the stock with a price target of Rs393.

Reliance Industries (RIL) has positively surprised in its Q3FY2007 results by reporting a whopping 57.6% year-on-year (y-o-y) growth in its earnings, way ahead of our and consensus estimates.

The net revenues for the quarter grew by 45.7% driven by a strong 48.2% y-o-y growth in the revenues from the petrochemicals business and a 37.5% y-o-y growth in the revenues from the refining business.

The profit before interest and tax (PBIT) in the petrochemicals business grew by only 32.2% on account of a 156-basis-point contraction in the margins. The PBIT of the refiing business grew by 124.9% on the back of a 358-basis-point expansion in the margins. As a result the PBIT grew by 38% yoy to Rs1,764 crore.

The refining business again gave a positive surprise and the gross refining margins (GRMs) grew by 28.6% yoy and also 28.6% sequentially despite a 36.1% yoy and a 17.9% sequential decline in the Singapore benchmark GRMs. In fact this is the highest ever out-performance over the benchmark Singapore complex by RIL.

With the better-than-expected performance of the refining division and the robust top line growth of the petrochemical business, the net profit grew by a massive 57.6% to Rs2,799 crore.

We like the way RIL has been diversifying into new areas of growth like the upstream oil and gas activity, organised retailing and construction of special economic zones (SEZs). However, these areas of businesses would entail a lot of investment for RIL going forward and we expect them to generate tremendous value for the shareholders.

We are revising our FY2007E earnings by 7.1% and the FY2008E earnings by 7.9%. Given the out-performance of our and street's expectations for the second consecutive quarter, more clarity on the exploration end of the business and definitive visions for the new ventures like retail, we are revising our price target to Rs1,530.

The net sales increased by 61% year on year (yoy) from Rs782 crore to Rs1,260 crore boosted by a 14% increase in the volumes and a 41% jump in the realisations.

The company's leverage to volumes resulted in the operating profit registering a growth of 244.5% yoy to Rs380 crore whereas the operating margins expanded by 1,600 basis points to 30% yoy.

On the backdrop of a robust realisation growth and a muted increase in the operating expenditure, the earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne stood at Rs879 clocking a y-o-y growth of 200% and a quarter-on-quarter (q-o-q) growth of 27%.

Sweetened by a higher-than-expected other income of Rs16 crore, the net profit stood at Rs212.5 crore clocking a y-o-y growth of 790%.

The company's capital expenditure (capex) plan of Rs2,700 crore is progressing well. This will provide the much needed volume growth going forward and result in higher profitability on account of the savings in power costs.

Taking notice of the stellar third quarter performance and considering the buoyant scenario in the sector in the next one year, we are upgrading our FY2007 earnings estimates by 6% to Rs722 crore and FY2008 earnings by 28% to Rs1,132 crore.

At the current market price of Rs1,130, the stock is discounting its FY2007 revised earnings by 18.4x and its FY2008 revised estimates by 12.4x whereas on an enterprise value (EV) per tonne basis, the stock is trading at USD171 per tonne. Maintaining our positive view on the stock, we are upgrading our price target to Rs1,365.

The revenue for the quarter grew by 28.5% to Rs120 crore on the back of a strong order book of Rs270 crore at the beginning of the quarter.

The operating profit for the quarter grew by 41.5% to Rs22.2 crore, as the operating profit margin (OPM) for the quarter improved by 180 basis points to 20.2% against 18.4% in Q3FY2006. This is a significant improvement and the company has been able to reverse the declining margin trend as depicted in H1FY2007 (H1FY2007 OPM stood at 11.9% as against 12.4%). The H1FY2007 performance was marred by the low margin 100MVA transformer business, which was the entry order for BBL in the high range market.

The interest for the quarter increased by 53% while the depreciation increased by 25%.

Consequently the net profit for the quarter grew by an impressive 43% to Rs13.37 crore.

The order backlog for the quarter jumped by almost 100%. The order inflows also showed a very strong growth of about 140% year on year (yoy).

The Q3FY2007 results of Genus Overseas Electronics (Genus) are in line with our expectations.

The revenues for the quarter grew by 266% to Rs89.5 crore mainly on the back of the faster execution of the Surat meter supply contract.

The operating profit for the quarter grew by 182% to Rs12.6 crore and the operating profit margin (OPM) for the quarter stood at 14.1% as against 18.3% in Q3FY2006. However, the Q3FY2007 and Q3FY2006 OPMs are not comparable. That's because the company had abnormal operations in Q3FY2006 due to a fire incident because of which the other expenses were on the lower side in Q3FY2006. Going forward, we expect the company to maintain its OPM in the range of 14.5-15%.

The interest expense for the quarter rose by 108%, as the company has availed of large working capital loans to execute its project orders.

Consequently, the net profit for the quarter grew by 273% to Rs6.2 crore.

The order book of the company stood at Rs470 crore at the end of December 2006.

NDTV witnessed a muted revenue growth of 15.8% year on year (yoy) to Rs79.1 crore owing to higher competition.

The operating profit margin (OPM) was down by 360 basis points yoy to 24.2% as the company is spending for new businesses. The operating profit was flat yoy at Rs19.1 crore as per expectations; however, it improved substantially compared to an operating loss in Q2FY2007.

The marketing and distribution cost, the primary reason forthe increased cost, was up 59.8% yoy at Rs10.7 crore, but as a percentage of sales it declined to 13.5% as compared to 14.1% and 18% in Q1FY2007 and Q2FY2007 respectively.

The incubation costs of the planned new ventures seem to have inflated the cost structure and segregation of these costs this quarter onwards will lead to the improved profitability picture for the news business.

The profit after tax (adjusted for extraordinary items) was down at Rs10.0 crore as against Rs14.1 crore in Q3FY2006 as expected.

We have lowered our earnings estimates for FY2007 and FY2008 as NDTV continues to be in an investment mode whereby we expect the short-term profitability to remain muted. At the same time we remain bullish on its exciting broadcasting properties, diversification in other genres of broadcasting such as general entertainment and lifestyle, its foray in the media consulting segment and media process outsourcing thus leveraging on its expertise in the business. The above makes it a good integrated media play.